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3 Sources of Funding
There are several sources available for start-up capital. The owner can finance it himself through his savings or an equity loan on his home or other assets. The owner could use financing via a stock issue (although there would be legal problems if it were offered to the general public). A partnership could be formed or perhaps a venture capitalist would provide funds if the business venture plans were sound enough. Relatives could also loan money but the owner should realize that if anyone else participates in the venture some elements of control will be lost.
A business should not be financed with credit cards because the interest rate will cause too much strain on the finances. Many owners seek a bank loan in the name of their business but the bank will insist on the personal guarantee of the business owner. In the United States, the Small Business Administration (SBA) runs a several loan programs that may help a small business secure loans. The SBA guarantees a portion of the loan to the issuing bank and thus relieves the bank of some of the risk of extending the loan to a small business.
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